Private equity investments, which are becoming more prominent in healthcare, are typically associated with higher costs to patients and payers, University of Chicago researchers found in a study published July 19 in BMJ.
Five things to know:
1. Private equity investment in healthcare has increased significantly in recent years in both the U.S. and Europe, with U.S. acquisitions accounting for three quarters of the combined $100 billion in investment in 2021, according to the study. The Medicare Payment Advisory Commission recently estimated that private equity firms own 11 percent of U.S. skilled nursing facilities and 4 percent of U.S. hospitals.
2. After examining 55 academic studies investigating private equity in healthcare, researchers found that such acquisitions increased in prevalence since 2000. Across four areas — quality, cost to payers and patients, cost to healthcare operators and outcomes — the study found that private equity investment was associated with up to a 32 percent increase in costs for payers and patients. Private equity ownership was also linked with mixed to harmful effects on quality, while the impact on outcomes and operator costs was inconclusive, according to researchers.
3. The study aims to make providers, policymakers and the public more aware of the growing influence of the financial sector in healthcare. Researchers indicated that providers may need to pay more attention to the financial burden placed on patients and believe that the findings may ignite more discussion around antitrust regulation and corporate practice of medicine laws.
4. Critics argue that private equity ownership could jeopardize patient safety by prioritizing profits, overburdening healthcare companies with debt, impeding care delivery through ongoing management changes and sellouts and over-emphasizing profitable services over less profitable ones.
5. Proponents argue that in addition to an infusion of capital, private equity ownership provides managerial expertise, reduces operational inefficiencies, leverages economies of scale and increases access to care by aligning profit incentives with high-quality care.
"The fact that we are not seeing improvements means we're not seeing clear indications that private equity makes healthcare more efficient by reducing administrative burden, streamlining processes or offering technology advances," Joseph Dov Bruch, PhD, assistant professor of public health sciences at UChicago and study's co-senior author, said.
Click here for more details on the study.